Former PayPal executive and Hollywood producer David Sacks returns to the start-up world, harnessing Web 2.0 to build a collaborative family-tree site.

David Sacks surveys the crowd. He’s at the Beverly Hilton for the Golden Globes, and the stars are out in force. There’s Tom Hanks, J. Lo, and Steven Spielberg. Even Schwarzenegger has shown up, maybe for a reminder of the good life he gave up to go to Sacramento. It’s fun to be a part of. After all, Sacks, JD’98, is living a dream. He parlayed the millions he made as one of PayPal’s first executives into a career as a credible Hollywood producer: his first film, Thank You For Smoking, is up for Best Comedy of 2006. Al Pacino wants to do his next project. This is great, right?

For months Sacks hasn’t been so sure. He goes to a few meetings every week, talks about scripts a bit, and then what? He’s come to feel that the job is not very complicated. “You basically make five decisions as a producer,” he says. “You find a script you like, hire someone to direct it, cast it, figure out how to pay for it, and then get it distributed. Everything else is basically someone else’s job. You could do a lot of it over the phone from Tahiti.”

The problem is, you can only lounge around Tahiti for so long. And even work moves at a slow pace: he hasn’t spent years honing the ability to sustain the classic three-hour Hollywood lunch. He prefers a quick bite of sushi downstairs from his office. Nor has he perfected the art of the early-afternoon cocktail meeting. To be honest, he’s not that interested in lounging. He wants excitement and adrenaline. He’s only 34. The bursts of activity—like the Golden Globes—are fleeting. The days feel empty. Sacks realizes that he’s bored.

It’s a surprising realization. Hollywood is supposed to be the pinnacle of stimulation, but for Sacks it pales in comparison to Silicon Valley and the height of the dot-com era. He joined online-payment company PayPal in 1999, served as chief operating officer, and left after eBay acquired the company in 2002. He was used to working all hours of the day and night and receiving feedback minute by minute from Internet users around the world. Now it’s years before an audience sees his work.

The solution is obvious. “Hollywood is great,” he says, “but it can’t beat the excitement of Silicon Valley.”

It was time to start a new company.

The sun hovered over the Pacific as Sacks and his girlfriend Jacqueline took a sunset stroll along the beach in Orange County in spring of 2006. It was a classic romantic moment—except that Sacks kept talking about Web 2.0 business ideas. “How about a site that lets your whole family build a family tree together?” Jacqueline agreed it was a good idea. But maybe she was just saying it so he’d shut up and enjoy the sunset. After all, Sacks had been voted one of the “hottest bachelors of 2006” by People magazine. She was ready for romance, but what she got was tech talk.

Sacks was intrigued by the Web’s evolution. The first generation of online businesses—Web 1.0—represented the migration of traditional business toward the digital realm. Bookstores became Amazon, the New York Times became NYTimes.com, and the Encyclopedia Britannica issued an online edition. In contrast, Web 2.0 reaped the inherent benefits of connecting people through the Internet. Its poster child, Wikipedia, allows anybody to add to or edit an online encyclopedia and already has roughly ten times Britannica’s entries, thanks to user submissions. The Web 2.0 start-ups feverishly look for new ways to leverage the crowd’s infectious enthusiasm.

YouTube has done so with videos and MySpace with music. But videos and music are generally things shared by friends. Sacks wondered what would bring families together. His Lithuanian grandmother had recently died, and the family wanted to exchange memories and photos of her. Yet relatives were scattered around the world. Sacks was born in South Africa and raised in Memphis, Tennessee. He has family in Canada, Israel, Australia, and South Africa. There was no easy way to do it. In his Sunset Boulevard office, next to a framed share of PayPal stock, Sacks kept a black-and-white photo of his grandparents. The picture made him feel a connection to his past, and he realized that lineage—and a sense of common history—forms family bonds. He knew there should be a way to capitalize on that instinct by allowing everyone in a family to help build a tree and share memories. By the end of the “romantic” walk on the beach, Sacks was sure that Web 2.0 provided the answer.

Dot-com energy can be hard to hem in. In August 2006 Sacks mentioned his idea for a new type of family tree to friend and former PayPal CEO Peter Thiel. Thiel had become a partner in a venture-capital fund and quickly committed $1.5 million to help finance the project, which Sacks dubbed Geni, a playful contraction of genealogy. By early 2007 Sacks had raised an additional $10 million from another venture-capital firm, which pegged the company’s value at $100 million after a few months of official existence. Geni swelled to 30 employees, and Sacks’s movie business—with only a few staff members—got crammed into a couple of rooms toward the back of the office. It didn’t matter that they were working on a biopic about Salvador Dali starring Al Pacino. Computer engineers flew remote-controlled helicopters around the lobby, and it felt like Silicon Valley again. Sacks was thrilled.

The idea behind Geni is simple. Existing genealogy sites like Ancestry.com and MyHeritage.com allow users to build their family trees online; they are, in other words, merely more effective dissemination methods for an age-old hobby. The concept of shifting the family tree to the digital realm is Web 1.0—and though the sites allow other members to add information, it’s a tedious process. It wasn’t built to be collaborative. Yet with a few clicks on Geni, one family member can essentially outsource the process of building the tree to other members. You may not know all your great-grandmother’s cousins, but your mother might, so why not let her fill in that information? The site maintains security by letting users choose whom to invite into the tree. No one but invited family members can see it, and as each family becomes invested in the site and its accuracy, it has the potential to become a venue for family announcements, birthday reminders, and baby photos.

For instance, when Sacks asked Jacqueline to marry him 11 days after Geni’s January 16 launch (she said yes), the site didn’t yet have a messaging feature, so he called as many family members as he could. Inevitably, distant relatives heard about it secondhand. But after the feature was installed in March, he was able to let the entire extended family know about the July 7 wedding with only a few clicks.

In the future, he plans for the site to do more. “We want to be the repository of all your family’s information,” he says. If users enter cause-of-death information about family members, he wants the site to help predict genetic susceptibility to illnesses. If it appears that someone is at an increased risk for heart disease, the site could advertise exercise books or specific medicines. He wants people to see what cars their family members are driving, what books they are reading, and what music they are into. “What we’re discovering with Web 2.0 is that people make their buying decisions based on what other people buy,” Sacks says. “They are particularly affected by what their friends and family like, so if Geni shows you what book your favorite uncle is reading, you may want to go out and buy that.”

In law school Sacks was desperate for movie recommendations. He admits he spent the majority of his Chicago years watching hundreds of films and was always looking for a good tip. His studies took a backseat to the more important goal of watching every great film ever made. He didn’t know what he wanted to do with his life and, after studying economics as a Stanford undergrad, thought law school would be a good place to figure it out. Once he arrived, he was more interested in sitting on the couch. One class that got him out of potato mode was Cass Sunstein’s constitutional-law course. The two seemed to see eye to eye and, in the intervening years, have come to similar conclusions about the future of knowledge. Sunstein recently published Infotopia (Oxford University Press, 2006), about the power of the online masses to produce knowledge.

“There is an unstoppable movement toward shared production of information,” says Sunstein. “Many minds are better than one. David has tapped into the power of collective production by encouraging lots of people to collaborate on the creation of family trees.

“Crowds, however, can quickly become mobs,” Sunstein warns, pointing out that Wikipedia is a target for vandals who inject misinformation into entries. Pranksters have added “Whoop-de Do” as former British Prime Minister Tony Blair’s middle name and falsely indicated that golfer Fuzzy Zoeller was a drug addict. Yet Wikipedia is cited four times more often than Encyclopedia Britannica in judicial opinions, Sunstein notes. The danger of letting a crowd control information is real.

“The problem with a crowd is that you don’t know who’s in it,” Sacks agrees. He lists a range of sites that display user reviews—YouTube and news-site Digg, for instance—and asks why anyone would trust people they don’t know. “But a family tree represents a select group of people, so when you get recommendations from your family, you have some basis to accept or reject the suggestion. Maybe you don’t like your mom’s musical taste, so you ignore that, but you might like her choice in restaurants.”

If this is true—if people do value the recommendations of family members—then Sacks has a business model. When a family member lists favorite books, the list could feature direct, revenue-generating links to online booksellers. Birth or wedding announcements could come with offers from flower purveyors. The site also could attract advertising revenue, which Sacks plans to start generating in 2008. But, like many start-ups, the site currently only seeks to attract users as it races to beat out other entrants to the family-tree business, such as Dutch competitor Zooof.com. So for now Geni is free to use, features no advertising, and makes no attempt to generate revenue.

Sacks’s plan hinges on the trust we put in our relatives, and its success or failure may be a tacit referendum on the strength of the American family. For those who don’t trust their families, Geni represents a risk. When users start a tree, they can build a profile, including addresses, political views, and religious beliefs (the drop-down menu offers choices including Wiccan and Scientology). They are also prompted to enter family names and corresponding e-mail addresses. Those relatives then can send out their own invites. As the tree expands and reaches far out into a family’s web, distant relatives suddenly have access to the original member’s information. It’s both the power and danger of a wiki-style design.

Users concerned about sharing information widely can hide their e-mail addresses, ages, and home addresses—or they can simply refrain from entering such information. Again, no one outside the tree has access to the information. Still, Sacks has made an assumption that people trust members of their extended family.

For Sacks, the beauty is that he doesn’t have to get it right immediately. It’s not like the film business, where a movie is shipped off to theaters and can’t be changed. Geni changes day by day, constantly responding to user feedback. For instance, a college student suggested that the site feature a time-line button to transform the tree into a visual walk through a family’s history. Sacks offered the kid a job and is building the feature. “I’m a perfectionist,” he says. “That’s what’s great about a Web site: I can just keep making it better and better.”

And making it better might lead to a new chapter in the Web’s history. The next step, Sacks believes, is monetizing word of mouth. “Every time you recommend something,” he says, “that recommendation is worth something.” The trick is to figure out a way to compensate people for their recommendations. Web 3.0, anybody?

Joshua Davis is a Wired contributing editor and the author of The Underdog: Finding the Meaning of Life in the World’s Most Outlandish Competitions (Random House, 2005). He also wrote the University of Chicago Magazine’s August/06 feature “La Dolce Baseball.”